Nepal faced with economic challenges after powerful quake

The Nepalese government has painted a bleak picture for the country's economy, saying that almost all major economic fundamentals have be battered by the earthquake, local media reported Sunday.

The Himalayan country's economy is expected to face a serious setback due to the powerful 7.9-magnitude earthquake which rattled the country on April 25. The quake has killed nearly 8,500 people.

"It's too early to calculate the exact damage and the impact of the earthquake on the economy. However, the economic growth target that we set earlier will be hard to achieve. The economic growth is going to fall from the projected rate," Baikuntha Aryal, joint secretary at Nepal's Ministry of Finance, told local newspaper Republica.

Nepal has made a target to achieve economic growth of 4.5 percent in the current 2014/2015 fiscal year.

Immediately after the powerful quake, the Asian Development Bank revised its economic growth forecast for Nepal to 4.2 percent from its earlier projection of 4.6 percent for the fiscal year.

"The service sector including tourism and hospitality is likely to see significant impact of the earthquake. There is no life in service sector activities till this date. The remaining two months will have significant impact of the growth target. This means it will be difficult to achieve the economic growth target in the remaining two months," said Aryal.

Similarly, inflation is expected to surpass the government target. In its growth projection for fiscal year 2014/2015, the government has set a target of containing inflation below 8 percent.

According to Ministry of Finance estimates, the quake and its subsequent flow of money as well as the supply side constraint is likely to push inflation above 8 percent.

The trade deficit, which is "already very high", will also widen in the current fiscal year as agricultural as well as manufacturing production is expected to go down due to the earthquake, the report said, adding that the slowdown in manufacturing industry, and the loss of livestock and damage in arable land is likely to propel import and hit export, thereby widening trade deficit.

Meanwhile, the Nepalese government has said that the revenue collection will also suffer in the current fiscal year.